Great Advice From Our Experts

(Living Trusts are a crucial piece of a successful estate, allowing you to have far more control over your assets than a simple will.) A revocable living trust allows you to save time and money by avoiding probate, but the benefits don’t end there.

Prevent Court Challenges

A contested will can derail your final wishes, quickly deplete your estate, and tear your loved ones apart. The validity of your will probably won’t be challenged in court, but if it is a living trust offers superior estate protection. Anyone attempting to challenge your trust will have to demonstrate to the court that:

You were mentally incompetent or unduly influenced by someone else when establishing the trust, or

The trust document itself isn’t valid (due to a forged signature, for instance).

These challenges can be easily avoided by demonstrating your continual involvement with the trust. Any transfers of property in and out of the trust – as well as your amendments to it after its creation – serve as evidence that you were competent to manage your affairs.

Unless you have reason to believe that a close relative (who expects to be an heir to your estate) will object to your estate plan after your death, a court challenge is unlikely. Here are a few red flags that are cause for concern:

You intend to leave only a small portion of your estate to your closest relatives, and they believe this is due to someone else’s influence over you.

You’re in a close relationship with someone your family doesn’t approve of.

You have a history of mental illness, and your relatives believe that you weren’t thinking clearly when creating your trust.

Your children from a previous marriage have a poor relationship with your current spouse, and either your spouse or kids may feel slighted.

If you fear a court battle over your estate, you should speak with an experienced attorney to ensure that your wishes are respected.

Prevent A Conservatorship

A living trust is a simple, popular way to avoid a court-supervised guardianship or conservatorship. If you only have a will and become incapacitated, your family members will need to go to court to petition for legal authority over your finances. Your spouse or adult child will typically request that the court appoint them as your conservator or guardian. Establishing a living trust prior to your death will allow you to appoint a successor trustee to manage trust property should you become incapacitated. This will protect your family members from the pain of an emotionally difficult and public court hearing. The trustee you choose will have the authority to take control of your bank accounts, investment accounts, and business interests without the need for a conservatorship.

Most trust documents specify that your incapacity must be certified in writing by one or two physicians. Once this has been completed, the successor trustee will have legal authority over all trust property, and will be able to use it for your benefit. As long as you remain the trustee of your own trust, no separate trust income tax is required. Upon your death, your successor trustee will take over the annual income tax return filing. The law mandates that this individual must act honestly and prudently.

Example: John creates a revocable living trust, and names himself as the trustee. The trust document states that in the event John becomes incapacitated and is incapable of managing his own affairs, his daughter Heather will replace him as trustee. Heather will manage the trust property for her father’s benefit, then distribute the remaining assets upon John’s death according to the instructions in the trust document.

Durable Power Of Attorney

Since your successor trustee lacks the authority to manage property that isn’t held in the trust, you’ll also need a durable power of attorney. A power of attorney is a legal document that gives the person you choose the authority to act in your place. Should you become incapacitated, you’ll need durable powers of attorney for both your finances and your medical care. A durable power of attorney simply means that the document will remain in effect should you be incapable of handling matters yourself. The trusted individual you name will be legally permitted to handle important issues for you – such as paying your bills, managing your investments, and directing your medical care.

To cover everything that matters to you, you’ll likely need two separate powers of attorney: one to address your medical care, and another to handle your finances. A medical power of attorney – or durable power of attorney for health care – allows you to name a trusted person to oversee your medical care and make healthcare decisions on your behalf. This individual will work with healthcare providers to ensure that you get the type of medical care you wish to receive. To ensure that your wishes are clear, you can use a second type of health care directive – a living will – to provide written health care instructions to your agent and health care providers.

You’ll also need a financial power of attorney in order to give your trusted agent the authority to handle financial transactions on your behalf. A durable power of attorney for finances allows your agent to manage all of your financial affairs for you should you become incapacitated. This includes everything from sorting through your mail and depositing checks on your behalf, to managing your retirement accounts and other investments.

(At David Ortiz Advisors we believe that it is you who should have control over your estate, not the court and certainly not chance. Living trusts have helped my clients prevent the chaos of probate and maintain the privacy of their affairs for years.) Have questions? I have answers. Click the contact tab above and fill out the Contact Form. I will be happy to answer any questions you have regarding your personal situation and try to provide you with a path forward that best meet your objectives.

Investment advisory services are offered and provided through David Ortiz Advisors, Inc., a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any particular securities. Past performance is not indicative of future results. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.